Yanmei Xie is senior associate fellow at the Mercator Institute for China Studies. After Canadian Prime Minister Mark Carney spoke at Davos last week, a whole continent contracted leadership envy. Calling the rules-based order — which Washington proselytized for decades before stomping on — a mirage, Carney gave his country’s neighboring hegemonic bully a rhetorical middle finger, and Europeans promptly swooned. But before the bloc’s politicians rush to emulate him, it may be worth cooling the Carney fever. Appearing both steely and smooth in his Davos speech, Carney warned middle powers that “when we only negotiate bilaterally with a hegemon, we negotiate from weakness.” Perhaps this was in reference to the crass daily coercion Canada has been enduring from the U.S. administration. But perhaps he was talking about the subtler asymmetry he experienced just days before in Beijing. In contrast to his defiance in Switzerland, Carney was ingratiating during his China visit. He signed Canada up for a “new strategic partnership” in preparation for an emerging “new world order,” and lauded Chinese leader Xi Jinping as a fellow defender of multilateralism. The visit also produced a cars-for-canola deal, which will see Canada slash tariffs on Chinese electric vehicles from 100 percent to 6.1 percent, and lift the import cap to 49,000 cars per year. In return, China will cut duties on Canadian canola seeds from 84 percent to 15 percent. In time, Ottawa also expects Beijing will reduce tariffs on Canadian lobsters, crabs and peas later this year and purchase more Canadian oil and perhaps gas, too. The agreement to launch a Ministerial Energy Dialogue will surely pave the way for eventual deals. These productive exchanges eventually moved Carney to declare Beijing a “more predictable” trade partner than Washington. And who can blame him? He was simply stating the obvious — after all, China isn’t threatening Canada with annexation. But one is tempted to wonder if he would have needed to flatter quite so much in China if his country still possessed some of the world’s leading technologies. The truth is, Canada’s oil and gas industry probably shouldn’t really be holding its breath. Chinese officials typically offer serious consideration rather than outright rejection out of politeness — just ask Russia, which has spent decades in dialogue with Beijing over a pipeline meant to replace Europe as a natural gas market. The cars-for-canola deal also carries a certain irony: Canada is importing the very technology that makes fossil fuels obsolete. China is electrifying at dizzying speed, with the International Energy Agency projecting its oil consumption will peak as early as next year thanks to “extraordinary” electric vehicle sales. That means Beijing probably isn’t desperate for new foreign suppliers of hydrocarbons, and the ministerial dialogue will likely drag on inconclusively — albeit courteously — well into the future. This state of Sino-Canadian trade can be seen as classic comparative advantage at work: China is good at making things, and Canada has abundant primary commodities. But in the not-so-distant past, it was Canadian companies that were selling nuclear reactors, telecom equipment, aircraft and bullet trains to China. Yet today, many of these once globe-spanning Canadian high-tech manufacturers have either exited the scene or lead a much-reduced existence. Somewhere in this trading history lies a cautionary tale for Europe. Deindustrialization can have its own self-reinforcing momentum. As a country’s economic composition changes, so does its political economy. When producers of goods disappear, so does their political influence. And the center of lobbying gravity shifts toward downstream users and consumers who prefer readily available imports. Europe’s indigenous solar manufacturers have been driven to near extinction by much cheaper Chinese products | STR/AFP via Getty Images Europe already has its own version of this story: Its indigenous solar manufacturers have been driven to near extinction by much cheaper Chinese products over the span of two decades. Currently, its solar industry is dominated by installers and operators who favor cheap imports and oppose trade defense. Simply put, Carney’s cars-for-canola deal is a salve for Canadian consumers and commodity producers, but it’s also industrial policy in reverse. In overly simplified terms, industrial policy is about encouraging exports of finished products over raw materials and discouraging the opposite in order to build domestic value-added capacity and productivity. But while Canada can, perhaps, make do without industry — as Carney put it in Davos, his ambition is to run “an energy superpower” — Europe doesn’t have that option. Agri-food and extractive sectors aren’t enough to stand up the continent’s economy — even with the likes of tourism and luxury goods thrown in. China currently exports more than twice as much to the EU than it imports. In container terms, the imbalance widens to 4-to-1. Meanwhile, Goldman Sachs estimates Chinese exports will shave 0.2 percentage point or more of GDP growth in Germany, Spain and Italy each year through 2029. And according to the European Central Bank, cars, chemicals, electric equipment and machinery — sectors that form Europe’s industrial backbone — face the most severe job losses from China trade shock. Europe shares Canada’s plight in dealing with the U.S., which currently isn’t just an unreliable trade partner but also an ally turned imperialist. This is why Carney’s speech resonates. But U.S. protectionism has only made China’s mercantilism a more acute challenge for Europe, as the U.S. resists the bloc’s exports and Chinese goods keep pouring into Europe in greater quantities at lower prices. European leaders would be mistaken to look for trade relief in China as Carney does, and bargain away the continent’s industrial capacity in the process. Whether it’s to resist an expansionist Russia or an imperial U.S., Europe still needs to hold on to its manufacturing base.

German industrial giant Bosch on Friday confirmed plans to cut 20,000 jobs after profits nearly halved last year, underlining the mounting strain on Germany’s once-dominant manufacturing sector and increasing the pressure on politicians in Berlin to find a solution. Official data released Friday also showed Germany’s unemployment rate, unadjusted for seasonal factors, rising to 6.6 percent — the highest level in twelve years. The number of unemployed people surpassed three million in January. “Economic reality is also reflected in our results,” Bosch CEO Stefan Hartung said, describing 2025 as “a difficult and, in some cases, painful year” for the company, which is a leading supplier of parts for cars. The move lands amid a deepening slump in the country’s automotive industry, long the backbone of German manufacturing. The sector has been shedding jobs rapidly: A 2025 study by EY found that more than 50,000 automotive positions were cut in Germany last year alone. Germany’s automotive downturn has become a wider political test for the government in Berlin and Europe more widely. Once the economy’s crown jewel, the industry is now being challenged by current policy on electric vehicles, energy costs and aggressive competition from Chinese manufacturers. As suppliers weaken, the risk is shifting from lower profits to a lasting loss of competitiveness. With layoffs rising and investment decisions being delayed, Chancellor Friedrich Merz’s government is coming under growing pressure from workers, unions and industry leaders to rethink Germany’s industrial strategy — as doubts spread domestically and across Europe about the country’s ability to remain an economic powerhouse.

LONDON — It’s a far cry from the ice age of U.K.-China relations that characterized Rishi Sunak’s leadership — and it’s not exactly David Cameron’s “golden era,” either.  As U.K. Prime Minister Keir Starmer embarks on his Chinese charm offensive against a turbulent economic backdrop, he has opted for a softly-softly approach in a bid to warm up one of Britain’s most important trading partners — a marked departure from his Tory predecessors. With the specter of U.S. President Donald Trump looming over the visit — not to mention national security concerns back home — Starmer’s cautious optimism is hardly surprising.  Despite reservations from China skeptics, Starmer’s trip — the first such visit by a British prime minister since 2018 — was peppered with warm words and a smattering of deals, some more consequential than others. Britain’s haul from the trip may be modest, but it’s just the beginning, Business and Trade Secretary Peter Kyle — who joined Starmer on the trip — told a traveling pack of reporters in Beijing. “This visit is a springboard,” the minister said. “This is not the last moment, it is a springboard into a future with far more action to come.” STEP-BY-STEP On the ground in Beijing, British officials gave the impression that the prime minister was focused on getting as many uncontroversial wins over the line as possible, in a bid to thaw relations with China. That’s not to say Starmer and his team don’t have a few tangible wins to write home about. Headline announcements include a commitment from China to allow visa-free travel for British tourists and business travelers, enabling visits of up to 30 days without the need for documents.   The provisions are similar to those extended to 50 other countries including France, Germany, Italy, Australia and Japan. The timings of the visa change have not yet been set out publicly, but one official — who, like others cited in this piece, was granted anonymity to speak freely — said they were aiming to get it nailed down in coming months. “From a business standpoint, it will reduce a lot of friction,” said a British business representative, adding it will make it easier for U.K. firms to explore opportunities and form partnerships. “China is very complicated. You have to be on the ground to really assess opportunities,” they said, adding visa-free travel “will make things a lot easier.” The commitment to visa-free travel forms part of a wider services package aimed at driving  collaboration for businesses in healthcare, financial and professional services, legal services, education and skills — areas where British firms often face regulatory or administrative hurdles.  The countries have also agreed to conduct a “feasibility study” to explore whether to enter negotiations towards a bilateral services agreement. If it goes ahead, this would establish clear and legally binding rules for U.K. firms doing business in China. Once again, the timeframe is vague. David Taylor, head of policy at the Asia House think tank in London, said “Xi’s language has been warmer and more expansive, signaling interest in stabilizing the relationship, but the substance on offer so far remains tightly defined.” “Beyond the immediate announcements, progress — particularly on services and professional access — will be harder and slower if it happens at all,” he added. WHISKY TARIFF RELIEF Another victory talked up by the British government is a plan for China to slash Scotch whisky tariffs by half, from 10 percent to 5 percent.  However, some may question the scale of the commitment, which effectively restores the rate that was in place one year ago, ahead of a doubling of the rate for whisky and brandy in February 2025. The two sides have not yet set out a timeframe for the reduction of tariffs.  Speaking to POLITICO ahead of Starmer’s trip, a senior business representative said the whisky and brandy issue had become “China leverage” in talks leading up to the visit. However, they argued that even a removal of the tariff was “not going to solve the main issue for British whisky companies in China and everywhere, which is that people aren’t buying and drinking whisky.” CHINA INVESTMENT WIN Meanwhile, China can boast a significant win in the form of a $15 billion investment in medicines manufacturing and research and development from British pharmaceutical giant AstraZeneca.  ING Bank’s global healthcare lead Stephen Farelly said that increasing investment into China “makes good business sense,” given the country is “now becoming a force in biopharma.” However, it “does shine a light on the isolation of Europe and the U.K. more generally, where there is a structural decline in investment and R&D.” AstraZeneca recently paused a £200 million investment at a Cambridge research site in September last year, which was due to create 1,000 jobs.  Britain recently increased the amount the NHS pays for branded, pharmaceutical drugs, following heavy industry lobbying and following trade negotiations with the Trump administration — all in the hopes of attracting new investment into the struggling sector.  Shadow Trade Secretary Andrew Griffith was blunt in his assessment. “AstraZeneca’s a great British company but under this government it’s investing everywhere in the world other than its U.K. home. When we are losing investment to communist China, alarm bells should be ringing in No 10 Downing Street.” Conspicuously absent from Starmer’s haul was any mention of net zero infrastructure imports, like solar panels, a reflection of rising concerns about China’s grip on Britain’s critical infrastructure. XI RETURNS So what next? As Starmer prepares to fly back home, attention has already turned to his next encounter with the Chinese leader.  On Thursday, Britain opened the door to an inward visit by Xi Jinping, with Downing Street repeatedly declining to rule out the prospect of welcoming him in future. Asked about the prospect of an inward visit — which would be the first for 11 years — Starmer’s official spokesperson told reporters: “I think the prime minister has been clear that a reset relationship with China, that it’s no longer in an ice age, is beneficial to British people and British business.” As Starmer’s trip draws to a close, one thing is certain: there is more to come. “This isn’t a question of a one-and-done summit with China,” Starmer’s spokesperson added. “It is a resetting of a relationship that has been on ice for eight years.”

Prime minister’s questions: a shouty, jeery, very occasionally useful advert for British politics. Here’s what you need to know from the latest session in POLITICO’s weekly run-through. What they sparred about: Keir Starmer escaped from all his domestic troubles by jetting off to China, so Deputy Prime Minister David Lammy was left to fend off questions from disgruntled MPs both in front of (and behind) him. Tory Leader Kemi Badenoch carried on rotating which frontbencher batted for the Conservatives, handing that dubious honor to Shadow Business Secretary Andrew Griffith. Given his brief, er, business rates dominated. Hold my beer: Griffith led on the government’s U-turn watering down business rate costs for pubs, asking Lammy to confirm that more than 90 percent of “retail, hospitality and leisure businesses will get nothing.” The deputy PM, you may not be surprised to read, swerved that interrogation and said it is “always a pleasure to hear from the co-author of the mini-budget” — Liz Truss’ economic proposals, which led to her swift departure from No 10. Drink: The PM may be out of the country, but it wouldn’t be PMQs without a mention of Britain’s shortest serving prime minister — the person Labour thinks is still the Tories’ biggest electoral liability nearly three-and-a-half years after she left office. Last orders: The shadow business secretary bigged up his experience, unsurprisingly, in business, contrasting that with Lammy’s 25 years “manufacturing grievance.” Nonetheless, Griffith claimed the help is “too little, too late” with striking visual imagery, arguing “our high streets are bleeding out and the chancellor’s handing out a box of sticking plasters.” Out of the till: Lammy may have had little notice that Griffith was stepping into the blue hot seat, but his aides did their homework. The deputy PM ripped into Griffith opposing the minimum wage. Best of enemies: Griffith had plenty of barbs up his sleeve too, labeling his opposite number “left behind Lammy” for not getting a cushty trip to Beijing. But the already depleted Tory benches were even quieter than usual, making it harder for the PMQs novice’s lines to land. That said: He managed a good line about “Andy from Manchester having his dreams crushed by Labour,” a reference to the Greater Manchester mayor getting blocked from standing in the Gorton and Denton by-election over fears he might challenge Starmer for the top job (though, of course, Labour would deny that). “It is our party that is getting stronger,” Griffith cried unironically to shrieks of laughter from the government benches. Indeed, the polls beg to differ. Crossing the line: As usual with these exchanges, the substance of support (or lack thereof) for businesses was lost after about question two. Lammy concluded his responses by highlighting that Badenoch praised the art of queuing during her appearance on the long-running BBC “Desert Island Discs” radio program. It was too easy for Lammy to argue Tory MPs took her at her word after three defections just this month. Helpful backbench intervention of the week: Rugby MP John Slinger continued meeting his ultra-loyalist stereotype by commending Labour’s record on the NHS and slipping in criticism of Reform’s health policies. Lammy couldn’t have been happier, joyously reiterating the point made by every Labour politician that the NHS is only safe under them. Totally unscientific scores on the doors: Lammy 8/10. Griffith 6/10. It was unsurprising for the Tories to lead on a U-turn, given there were many to choose from. However, despite business rates being Griffith’s area of expertise, he did not make his point land. Good lines from both sides meant the session became a battle of which voices could shout the loudest. Given the government’s parliamentary majority, there could only be one winner.

BRUSSELS — The European Commission’s vice president Henna Virkkunen sounded the alarm about Europe’s dependence on foreign technology on Tuesday, saying “it’s very clear that Europe is having our independence moment.” “During the last year, everybody has really realized how important it is that we are not dependent on one country or one company when it comes to some very critical technologies,” she said at an event organized by POLITICO. “In these times … dependencies, they can be weaponized against us,” Virkkunen said. The intervention at the event — titled Europe’s race for digital leadership — comes at a particularly sensitive time in transatlantic relations, after U.S. President Donald Trump’s recent threats to take over Greenland forced European politicians to consider retaliation. Virkkunen declined to single out the United States as one of the partners that the EU must de-risk from. She pointed to the Covid-19 pandemic and Russia’s invasion of Ukraine as incidents that point to Europe’s “vulnerabilities.” She said the U.S. is a key partner, but also noted that “it’s very important for our competitiveness and for our security, that we have also our own capacity, that we are not dependent.” The Commission’s executive vice president for tech sovereignty swung behind the idea of using public contracts as a way to support the development of European technology companies and products. “We should use public procurement, of course, much more actively also to boost our own growing technologies in the European Union,” she said when asked about her stance on plans to “Buy European.” Those plans, being pushed by the French EU commissioner Stéphane Séjourné, in charge of European industy, to ensure that billions in procurement contracts flow to EU businesses, are due to be outlined in an upcoming Industrial Accelerator Act that has been delayed multiple times. “Public services, governments, municipalities, regions, also the European Commission, we are very big customers for ICT services,” Virkkunen said. “And we can also boost very much European innovations [and startups] when we are buying services.” Virkkunen is overseeing a package of legislation aimed at promoting tech sovereignty that is expected to come out this spring, including action on cloud and artificial intelligence, and microchips — industries in which Europe is behind global competitors. When asked where she saw the biggest need for Europe to break away from foreign reliance, the commissioner said that while it was difficult to pick only one area, “chips are very much a pre-condition for any other technologies.” “We are not able to design and manufacture very advanced chips. It’s very problematic for our technology customer. So I see that semiconductor chips, they are very much key for any other technologies,” she said.

BRUSSELS — Pressure is mounting on the European Commission to exempt fertilizers from its new carbon tariff scheme, as national capitals side with farmers over industry to unpick one of the EU’s newest climate policies. During a discussion requested by Austria on Monday, 12 countries called for a temporary exclusion of fertilizers from the European Union’s carbon border adjustment mechanism (CBAM), a levy on the greenhouse gas emissions of certain goods imported into the bloc. They argued that CBAM, which only became fully operational on Jan. 1, is sending already-rising fertilizer even higher, adding to economic difficulties for crop farmers. “European arable farmers are currently facing not just low producer prices, but also rising production costs. The main cost drivers are fertilizer prices, which have increased markedly since 2020,” Johannes Frankhauser, a senior official in Austria’s agriculture ministry, told ministers gathered in Brussels. Eleven countries backed Vienna in Monday’s meeting. Yet critics — which include fertilizer producers, environment-focused MEPs and several governments — warn that such an exemption would not only penalize the EU’s domestic producers but threaten the integrity of the carbon tariff scheme. “High prices of production inputs, including fertilizers, have a direct impact on the economic situation of farms… However, we want an optimal solution in order to maintain food security on one hand and on the other [avoid] possible negative impacts on the competitiveness of EU fertilizer producers,” said Polish Agriculture Minister Stefan Krajewski, whose country is a major fertilizer producer.  Germany, Belgium, Finland, Sweden and the Netherlands expressed similar sentiments.  CBAM was phased in over several years and is supposed to protect European producers of heavily polluting goods — cement, iron, steel, aluminum, fertilizers, electricity and hydrogen — from cheap and dirty foreign competition. EU manufacturers of these products currently pay a carbon price on their planet-warming emissions, while importers didn’t before the CBAM came into force. By introducing a levy on imports from countries without carbon pricing, the EU wants to even out the playing field and encourage its trading partners to switch to cleaner manufacturing practices. (Those partners aren’t too happy.) The CBAM price is paid by the importers, which are free to pass on the cost to buyers — in the case of fertilizers, farmers.  Fertilizers make up a substantial share of farms’ operating costs, and EU-based companies do not produce enough to match demand. CBAM is therefore expected to push up fertilizer costs, though estimates on by how much vary greatly. A group of nine EU countries led by France mentioned a 25 percent increase in a recent missive, while Austria reckons it’s 10-15 percent.  The main cost drivers are fertilizer prices, which have increased markedly since 2020,” Johannes Frankhauser, a senior official in Austria’s agriculture ministry, told ministers gathered in Brussels. | Olivier Hoslet/EPA Carbon pricing analyst firm Sandbag, however, says it’s far lower for the next two years — less than 1 percent, or a couple of euros per ton of ammonia, a fertilizer component that costs several hundred euros per ton without the levy. Responding to governments on Monday, Agriculture Commissioner Christophe Hansen noted that the EU executive already tweaked the policy to provide relief to farmers in December, and followed up in January with a promise to suspend some regular tariffs on fertilizer components to offset the additional CBAM cost. SUSPENSION SUSPENSE The Commission in December set in motion legislative changes that could allow it to enact such a suspension in the event of “serious and unforeseen circumstances” harming the bloc’s internal market — in effect, an emergency brake for CBAM. The suspension can apply retroactively, the EU executive said earlier this month. Yet EU governments and the European Parliament each have to approve this clause before the Commission could make such a move, a process expected to take the better part of this year. Environment ministers can vote on the changes in March or June, and MEPs haven’t even chosen their lead lawmakers to work on the Parliament’s position yet. That’s why Austria on Monday called on the Commission to “immediately” suspend CBAM until “the regular possibility to temporarily suspend CBAM on fertilisers is ensured.” The legal basis for such a move is unclear, as the legislation in force does not feature an exemption clause.  Vienna’s request for a debate came after a group of nine countries — Bulgaria, Croatia, France, Greece, Hungary, Latvia, Luxembourg, Portugal and Romania — wrote to the Commission requesting a suspension earlier this month. During Monday’s discussion, Croatia and Estonia also expressed support for such a move.  Ireland welcomed the Commission’s proposal of a suspension clause but asked for additional details.  Spain was ambivalent: “We need to strengthen our industrial capacity to contribute to the strategic autonomy of the European Union. But clearly, the decarbonisation of this sector mustn’t jeopardize farmers’ livelihoods,” said Spanish Agriculture Minister Luis Planas.  Italy, which previously signaled its support for a suspension, did not explicitly endorse such a move — merely backing the Commission’s already-announced tweaks to normal fertilizer tariffs in its intervention on Monday.  Not all countries took to the floor. Czechia, for example — whose new government is opposed to large parts of EU climate legislation, but whose prime minister owns Europe’s second-largest nitrogen fertilizer producer — remained silent. The Czech agriculture ministry did not respond to a request for comment. INDUSTRY ALARMED While exempting fertilizers may win governments kudos from farmers, European fertilizer manufacturers would be irate. The producers’ association Fertilisers Europe warned that such a move would be “totally unacceptable” and “undermine the competitiveness” of EU companies. Yara, a major Norwegian fertilizer producer, said that “CBAM was designed to ensure a level playing field. Weakening it through tariff reductions or retroactive suspension sends the wrong signal to companies investing in Europe’s green transition.” Mohammed Chahim, the vice president of the center-left Socialists and Democrats in the European Parliament, said that EU companies “need regulatory stability.” “European fertilizer producers have spent precious time and significant resources, often with support from taxpayer money, to decarbonize,” said the Dutch MEP, who drafted the Parliament’s position on the original CBAM law. “Any exemptions for CBAM send a terrible signal — not just to our own industry, but to the world.”  It’s not only makers of fertilizer that are up in arms. Companies in the heavy industry sector — whose competitiveness CBAM is supposed to protect — are warning that granting an exemption once could produce a domino effect, encouraging buyers of all CBAM goods to lobby for relief.  German MEP Peter Liese, environment coordinator of the center-right European People’s Party, said earlier this month that a retroactive exemption would be “theoretically possible” but that he was “very much against it because I believe that if we start doing that, we will end up in a cascade. | Ronald Wittek/EPA “Once one sector gets an exemption, other sectors will want this too,” warned the Business for CBAM coalition, a lobby group of companies and industry groups. “We therefore call on the European Parliament and [ministers] to remove” the exemption clause, it added.  Similarly, German MEP Peter Liese, environment coordinator of the center-right European People’s Party, said earlier this month that a retroactive exemption would be “theoretically possible” but that he was “very much against it because I believe that if we start doing that, we will end up in a cascade. If we suspend it for fertilizers, there are immediately arguments to suspend it in other sectors as well.” 

BRUSSELS — Only a few days ago, EU diplomats and officials were whispering furtively about the idea they might one day need to think about how to push back against Donald Trump. They’re not whispering anymore.  Trump’s attempt, as EU leaders saw it, to “blackmail” them with the threat of tariffs into letting him take the sovereign Danish island of Greenland provoked a howl of outrage — and changed the world.  Previous emergency summits in Brussels focused on existential risks to the European Union, like the eurozone crisis, Brexit, the coronavirus pandemic, and Russia’s invasion of Ukraine. This week, the EU’s 27 leaders cleared their diaries to discuss the assault they faced from America.  There can be little doubt that the transatlantic alliance has now been fundamentally transformed from a solid foundation for international law and order into a far looser arrangement in which neither side can be sure of the other.  “Trust was always the foundation for our relations with the United States,” said Polish Prime Minister Donald Tusk as he arrived for the summit in Brussels on Thursday night. “We respected and accepted American leadership. But what we need today in our politics is trust and respect among all partners here, not domination and for sure not coercion. It doesn’t work in our world.”  The catalyst for the rupture in transatlantic relations was the U.S. president’s announcement on Saturday that he would hit eight European countries with tariffs of 10 percent for opposing his demand to annex Greenland.  That was just the start. In an avalanche of pressure, he then canceled his support for the U.K. premier’s decision to hand over the Chagos Islands, home to an important air base, to Mauritius; threatened France with tariffs on Champagne after Macron snubbed his Board of Peace initiative; slapped down the Norwegian prime minister over a Nobel Peace Prize; and ultimately dropped his threats both to take Greenland by military force and to hit countries that oppose him with tariffs.  Here was a leader, it seemed to many watching EU officials, so wild and unpredictable that he couldn’t even remain true to his own words.  But what dismayed the professional political class in Brussels and beyond was more mundane: Trump’s decision to leak the private text messages he’d received directly from other world leaders by publishing them to his 11.6 million followers on social media.  Trump’s screenshots of his phone revealed French President Emmanuel Macron offering to host a G7 meeting in Paris, and to invite the Russians in the sidelines. NATO Secretary-General Mark Rutte, who once called Trump “daddy,” also found his private text to Trump made public, in which he praised the president’s “incredible” achievements, adding: “Can’t wait to see you.”  Leaking private messages “is not acceptable — you just don’t do it,” said one senior diplomat, like others, on condition of anonymity because the matter is sensitive. “It’s so important. After this, no one can trust him. If you were any leader you wouldn’t tell him anything. And this is a crucial means of communication because it is quick and direct. Now everything will go through layers of bureaucracy.”  Mark Carney had been one of the classic Davos set and was a regular attendee: suave, a little smug, and seeming entirely comfortable among snow-covered peaks and even loftier clientele. | Gian Ehrenzeller/EPA The value of direct contact through phone texts is well known to the leaders of Europe, who, as POLITICO revealed, have even set up their own private group chat to discuss how to respond when Trump does something inflammatory. Such messages enable ministers and officials at all levels to coordinate solutions before public statements have to be made, the same senior diplomat said. “If you don’t have trust, you can’t work together anymore.”  NO MORE NATO Diplomats and officials now fear the breakdown in personal trust between European leaders and Trump has potentially grave ramifications.  Take NATO. The military alliance is, at its core, a promise: that member countries will back each other up and rally to their defense if one of them comes under attack. Once that promise looks less than solid, the power of NATO to deter attacks is severely undermined. That’s why Denmark’s Prime Minister Mette Frederiksen warned that if Trump invaded the sovereign Danish territory of Greenland it would be the end of NATO.  The fact he threatened to do so has already put the alliance into intensive care, another diplomat said.  Asked directly if she could still trust the U.S. as she arrived at the Brussels summit, Frederiksen declined to say yes. “We have been working very closely with the United States for many years,” she replied. “But we have to work together respectfully, without threatening each other.”  European leaders now face two tasks: To bring the focus back to the short-term priorities of peace in Ukraine and resolving tensions over Greenland; and then to turn their attention to mapping out a strategy for navigating a very different world. The question of trust, again, underpins both.  When it comes to Ukraine, European leaders like Macron, Germany’s Friedrich Merz and the U.K.’s Keir Starmer have spent endless hours trying to persuade Trump and his team that providing Kyiv with an American military element underpinning security guarantees is the only way to deter Russian President Vladimir Putin from attacking again in future.  Given how unreliable Trump has been as an ally to Europe, officials are now privately asking what those guarantees are really worth. Why would Russia take America’s word seriously? Why not, in a year or two, test it to make sure?  THE POST-DAVOS WORLD Then there’s the realignment of the entire international system.  There was something ironic about the setting for Trump’s assaults on the established world order, and about the identities of those who found themselves the harbingers of its end.  Among the snow-covered slopes of the Swiss resort of Davos, the world’s business and political elite gather each year to polish their networks, promote their products, brag about their successes, and party hard. The super rich, and the occasional president, generally arrive by helicopter.  As a central bank governor, Mark Carney had been one of the classic Davos set and was a regular attendee: suave, a little smug, and seeming entirely comfortable among snow-covered peaks and even loftier clientele.  Now prime minister of Canada, this sage of the centrist liberal orthodoxy had a shocking insight to share with his tribe: “Today,” Carney began this week, “I’ll talk about the rupture in the world order, the end of a nice story, and the beginning of a brutal reality where geopolitics among the great powers is not subject to any constraints.”  “The rules-based order is fading,” he intoned, to be replaced by a world of “great power rivalry” in which “the strong do what they can, and the weak suffer what they must.”  “The old order is not coming back. We should not mourn it. Nostalgia is not a strategy.”  Carney impressed those European officials watching. He even quoted Finnish President Alexander Stubb, who has enjoyed outsized influence in recent months due to the connections he forged with Trump on the golf course.  NATO Secretary-General Mark Rutte, who once called Donald Trump “daddy,” also found his private text to Donald Trump made public, in which he praised the president’s “incredible” achievements, adding: “Can’t wait to see you.” |  Jim lo Scalzo/EPA Ultimately, Carney had a message for what he termed “middle powers” — countries like Canada. They could, he argued, retreat into isolation, building up their defenses against a hard and lawless world. Or they could build something “better, stronger and more just” by working together, and diversifying their alliances. Canada, another target of Trump’s territorial ambitions, has just signed a major partnership agreement with China. As they prepared for the summit in Brussels, European diplomats and officials contemplated the same questions. One official framed the new reality as the “post-Davos” world. “Now that the trust has gone, it’s not coming back,” another diplomat said. “I feel the world has changed fundamentally.”  A GOOD CRISIS It will be up to European Commission President Ursula von der Leyen and her team to devise ways to push the continent toward greater self-sufficiency, a state that Macron has called “strategic autonomy,” the diplomat said. This should cover energy, where the EU has now become reliant on imports of American gas.  The most urgent task is to reimagine a future for European defense that does not rely on NATO, the diplomat said. Already, there are many ideas in the air. These include a European Security Council, which would have the nuclear-armed non-EU U.K. as a member. Urgent efforts will be needed to create a drone industry and to boost air defenses.  The European Commission has already proposed a 100,000-strong standing EU army, so why not an elite special forces division as well? The Commission’s officials are world experts at designing common standards for manufacturing, which leaves them well suited to the task of integrating the patchwork of weapons systems used by EU countries, the same diplomat said.  Yet there is also a risk. Some officials fear that with Trump’s having backed down and a solution to the Greenland crisis now apparently much closer, EU leaders will lose the focus and clarity about the need for change they gained this past week. In a phrase often attributed to Churchill, the risk is that EU countries will “let a good crisis go to waste.”  Domestic political considerations will inevitably make it harder for national governments to commit funding to shared EU defense projects. As hard-right populism grows in major regional economies, like France, the U.K. and Germany, making the case for “more Europe” is harder than ever for the likes of Macron, Starmer and Merz. Even if NATO is in trouble, selling a European army will be tough.  While these leaders know they can no longer trust Trump’s America with Europe’s security, many of them lack the trust of their own voters to do what might be required instead. 

China’s Vice Premier He Lifeng positioned his country as a champion of the rules-based international order Tuesday, in a speech at the World Economic Forum that indirectly attacked the Trump administration. “The unilateral acts and trade deals of certain countries clearly violate the fundamental principles and rules of the [World Trade Organization], and severely impact the global economic and trade order,” said He, adding that the world shouldn’t slide back into “the law of the jungle, where the strong bully the weak.” The remarks come amid unprecedented tensions between the European Union and the U.S. over Washington’s threats to annex Greenland by force. The escalation has already led President Donald Trump to threaten a group of European countries with new duties after they sent troops to the North Atlantic island. Another country caught in the middle of U.S. President Trump’s tariff onslaught, Canada, has already moved closer into China’s orbit as a response. Ottawa, a longstanding U.S. ally, signed an agreement last week that would liberalize trade in agricultural goods and electric vehicles. “Tariffs and trade war have no winners,” said He, praising the benefits of “free trade and economic globalization.” He said that the global trade system was facing its biggest challenge in years. He called on countries to not turn their back on globalization and trade liberalization that had been instrumental in helping “many countries, including China” achieve “fast development.” The vice premier did acknowledge that globalization “wasn’t perfect” but said that it would be wrong for nations to retreat into “self-imposed isolation”. He also addressed some common criticisms of China’s economic model, which generated a record trade surplus of nearly $1.2 trillion in 2025. In Europe, that enormous level of exports has stoked worries of China crushing European businesses across a range of industries, including the automotive sector. The vice premier insisted that China wasn’t only seeking to export goods abroad, but also wanted to be the “world’s market.” But, he added: “When China wants to buy, other countries don’t want to sell.” The U.S. has imposed restrictions on the sale to China of cutting-edge microchips used in AI. Beijing is trying to support domestic demand, putting it at the top of its economic agenda, He said. However, household consumption, as a share of GDP, has been on a downward trend for decades and was still less than 40 percent last year, compared to a global average of over 60 percent, according to World Bank data. Many economists arguee that an increase in household income could both help China absorb its own manufacturing surplus, dampening exports, and create more demand for goods produced abroad — for example for European luxury items. “We encourage businesses from around the world to seize the opportunities presented by our expanding domestic demand, provide more and better products and services, and further explore China’s consumer market,” said He. “China will open its door still wider to the world.”

Europe is laying the foundation for renewed economic growth. Regulatory simplification is gaining traction. Public investment is accelerating in technology, energy and defense. Private capital is supplementing these efforts. These are meaningful steps, which, in the eyes of many, are long overdue and still need to gain pace. But an additional ingredient is required.  Our new research finds that closing the continent’s competitiveness gap requires Europe’s major companies to place a new emphasis on entrepreneurial courage: that is, the increased willingness to embrace uncertainty and take calculated risks in service of renewal and growth. Corporate leaders willing to make bold investments and engage in modern public-private collaborations, much like their American and Asian peers, stand to reap the rewards for acting decisively and with greater urgency.   Europe’s global competitiveness is ultimately a function of individual companies making a material difference, particularly large corporations and dynamic scale-ups. And it doesn’t require many acting boldly to have a disproportionate impact. In examining a sample representing about 15 percent of the U.S. economy, the McKinsey Global Institute found that more than two-thirds of productivity growth between 2011 and 2019 was driven by just 44 ‘standout’ companies. Meanwhile, 13 standout companies drove a similar proportion of the German sample’s productivity growth during the same period. These highly valued ‘outliers’, together with differences in growth and return on invested capital, underpin much of the valuation gap between European companies and their international peers, as highlighted in research we conducted on UK capital markets.   The status quo is not tenable.  Since the global financial crisis, Europe has endured a prolonged slump in private investment that has been especially pronounced in future-shaping industries. In the past five years alone, our analysis found that companies with headquarters in the United States have invested €2 trillion more in digital technologies such as artificial intelligence (AI) than their European peers. And in traditional manufacturing industries, China is out-investing Europe at a rate of 3:1.  > This investment gap not only stifles European economic growth, but prevents > the continent from inventing, developing and deploying the technologies it > needs to increase productivity and drive prosperity.  And the need to boost investments is growing: when the landmark Draghi report on European competitiveness was released in 2024, it estimated that an additional €800 billion needed to be mobilized annually to start closing the continent’s competitiveness gap. With the required additional investment in defense, that figure is now estimated to be €1.2 trillion annually for the next five years.  Of course, the regulatory landscape is also important. The positive news over the past year is that the European Commission has implemented dozens of initiatives, from regulatory simplification to streamlining and enhancing funding and market-creation mechanisms, as well as preparing to propose a ‘28th regime’ to make it easier for companies to scale across its 27 member states. Governments are also stepping up, with growth in strategic public investment in technology, energy and defense capabilities creating tailwinds for private investment. For instance, Germany amended its constitution to exempt defense spending above 1 percent of GDP from its debt brake and established a €500 billion fund to support infrastructure and climate-neutral investment. Similar programs are taking shape in France, Italy, the Netherlands and the Nordics.  But, while private sector activity shows some signs of acceleration, more is needed. Driving Europe’s economic vitality requires the emergence of standout companies, acting both individually and in close collaboration with the public sector. Without it, Europe risks another decade of ‘secular stagnation’: sluggish real GDP growth of around 1 percent annually as excess savings and a dearth of investment depress aggregate demand and push interest rates back to near zero.  > So, what does it take to show more entrepreneurial courage? Informed by our > global research and what we see standout firms doing, our research highlights > a range of actions leaders could explore.  One example is making broader ecosystem plays, such as semiconductor company ASML joining with the Dutch government and regional partners to launch Project Beethoven, a €2.5 billion public-private investment to ensure ASML’s continued presence and expansion of the broader microchip cluster in Eindhoven. Another is re-inventing potential stranded assets to position them for the industries of the future, illustrated by the range of European utilities converting or marketing former coal and gas power plant sites for hyperscale data centers. And a clear one is radical adoption of AI and automation technologies, which MGI’s research shows could add up to 3.4 percentage points to annual productivity growth globally through 2040.  > Europe has an opportunity to take steps to decisively alter its competitive > trajectory.  But while public sector leaders can lay the foundations necessary to accelerate investment and growth, the continent’s leading companies are distinctly positioned to amplify this and make a critical contribution to the continent’s prosperity, security and strategic autonomy. There’s growing consensus on what needs to be done. What’s now needed is a hefty dose of entrepreneurial courage to act.

LONDON — U.S. President Donald Trump’s trade negotiators are pushing for the U.K. to adopt American standards in a move that would derail Britain’s post-Brexit relationship with the European Union, two people familiar with the talks have told POLITICO. The U.S. is also pushing hard for the recognition of American accreditation bodies in the U.K., three other people with knowledge of the demands confirmed. The joint moves would have knock-on effects for safety-critical sectors like food, forensics, manufacturing and NHS testing, experts fear. “It’s this invisible infrastructure that no one really knows about but which keeps everyone safe — and that’s now under threat,” a person briefed on the talks told POLITICO. They, like others cited in this piece, were granted anonymity to speak freely. American negotiators have turned up the heat in trade talks with the recent suspension of the Technology Prosperity Deal, amid frustration over the pace of wider negotiations. U.K. negotiating asks on steel and Scotch whisky tariffs have also gone unanswered. Trump threatened a fresh wedge in the relationship over the weekend, vowing to impose tariffs on Britain and other European allies pushing back at his desire for the United States to own Greenland. The standards push comes as the Trump administration hollows out American watchdogs, with sweeping cuts to the Food and Drug Administration and the dismantling of the Consumer Product Safety Commission. While food standards remain a red line for the U.K. government, some figures familiar with the talks fear the U.K. could cave in on other U.S. demands. “My concern is that these red lines that have been red lines from the outset and for years are under increasing threat of being breached,” the person cited above said.   British negotiators have so far refused to back down, but U.S. negotiators “keep circling back” on these issues, another person who was briefed on the talks by both governments said. Peter Holmes, an expert on standards from the UK Trade Policy Observatory at the University of Sussex, warned that accepting U.S. demands could lead to a “race to the bottom” with the U.K. regarded as a “wild west market” internationally. A U.K. government spokesperson said: “Our historic agreement with the U.S. has already delivered for the pharma, aerospace and auto sectors, while our deal with the EU will see the removal of trade barriers including SPS, saving hundreds of millions on U.K. exports.” “We have and always will be clear that we will uphold our high food, animal welfare and environmental standards in trade deals, and negotiations will continue with both the EU and U.S. on strengthening our trading relationship,” the spokesperson added. The U.K. says it will uphold its high food, animal welfare and environmental standards in trade deals. | Geography Photos/Universal Images Group via Getty Images A spokesperson for the United States Trade Representative said the claims came from “anonymous and irrelevant sources” with “no insight into the trade discussions between the U.S. and U.K.”  The spokesperson did not contest any specific aspects of this report. They added that the two nations had successfully implemented “numerous aspects of the U.S.-U.K. EPD,” including “mutually expanding access of U.S. and U.K. beef in each other’s markets.”  “The U.S. and U.K. continue to work together constructively on finalizing remaining aspects of the EPD, including the U.K. commitment to ‘improve market access for agricultural products’ from the United States,” the spokesperson said. IMPACT ON BREXIT RESET TALKS Giving in to the U.S. demands would upset Britain’s ability to trade more closely with the EU as part of ongoing Brexit “reset” negotiations with the bloc that include alignment on food standards and carbon emissions in manufacturing. The U.K. government has “very clear red lines around all of this because they are going to do certain things with the EU,” the second person quoted above explained. “You would have thought these matters had already been well ventilated and resolved,” the person added, explaining that in talks the U.S. side “keep saying ‘why can’t you do more food standards? Why aren’t you coming closer on our side of it? Are you really sure what you’re doing with the EU is the right thing to do?’” Negotiations with the U.S. are “pretty much [in] stasis at the moment,” the same person continued. As London’s Brexit reset talks with the EU progress this year, “the possibility to have the kinds of changes that the U.S. is putting forward become much diminished when those agreements with the EU start to get over the line.” RECOGNITION OF ACCREDITATION BODIES Multiple people briefed on the trade talks claim the U.S. proposals go beyond the terms of the original U.K.-U.S. Economic Prosperity Deal agreed last May between U.S. President Donald Trump and Britain’s Prime Minister Keir Starmer.  In addition to headline commitments to cut tariffs on cars, steel and pharmaceuticals, the wide-ranging deal included a promise to address “non-tariff barriers,” including a pledge to treat conformity assessment bodies — such as testing labs and certification groups from the other nation — in a way that is “no less favorable” than the treatment of its own.  This is an increasingly common commitment in U.K. trade deals and typically means that accreditation bodies would have the power to accredit a whole range of certification and testing providers from the other country. However, U.S. negotiators are now pushing for the recognition of disparate American accreditation bodies, which would give them the authority to approve certification, testing and verification organizations in the U.K., three people briefed on the talks confirmed. Accepting this demand would mean that the U.K.’s national accreditation body, UKAS, would no longer meet the basic requirements of membership in the European Co-operation for Accreditation, under which national accreditation bodies recognize each other’s accreditations.  U.K. Prime Minister Keir Starmer says he wanted the U.K. to seek “even closer alignment” with the EU. | Leon Neal/Getty Images This would put the proposed U.K.-EU agrifood deal and plans to link U.K. and EU Emissions Trading Schemes “at massive risk,” should those deals require the EU to recognize U.K. emissions verification bodies and food control laboratories, the first person cited above explained. An industry figure familiar with the ETS linkage talks said an acceptance of the changes would amount to a “watering down” of the entire carbon pricing system, adding that “every single company falling under UK ETS” would be “absolutely furious.” It could also jeopardize any future alignment with the EU in other areas such as manufactured goods, a second industry figure briefed on the negotiations said.  The U.K. government has indicated a willingness to go even further in its relationship with the EU, with U.K. Prime Minister Keir Starmer saying he wanted the U.K. to seek “even closer alignment” with the single market.  Beyond plans outlined in the Common Understanding last May, “there are other areas where we should consider if it’s in our interests to … align with the single market,” he told the BBC in a recent interview. “Now that needs to be considered on an issue-by-issue, sector-by-sector basis, but we’ve already done it with food and agriculture, and that will be implemented this year.” ‘RACE TO THE BOTTOM’ The U.S. operates a decentralized standards system in which accreditation is carried out by a competitive network of organizations, most of which are commercial. This is in direct contrast to the U.K.’s current model of accreditation, whereby a single, non-profit accreditation body, UKAS, oversees certification and product testing in the public interest. The UK Trade Policy Observatory’s Peter Holmes warned that adopting the U.S. system could lead to a “race to the bottom”, with UKAS pitted against American accreditation bodies. “They might have to cut corners and give up their legally-required public service obligations,” he said.  Accepting U.S. accreditation bodies would make the U.K. a “wild west market where you can’t trust anything that’s on sale in the U.K.,” he added. The U.K. government has repeatedly rejected the possibility of changes to British standards, including the possibility of accepting American chlorine-washed chicken and hormone-treated beef.  “We will not compromise on food standards,” Trade Minister Chris Bryant said in an interview with CNBC this month. “That is the beginning and end of everything I have to say on that subject. Food standards are really important. There is no compromise for us to strike there.”